Proposed reforms in the U.S. health care system have become even more difficult to evaluate due to the increased complexity of the health care sector and its relationship to other sectors of the economy. The coexistence of traditional fee-for-service (FFS) arrangements and alternative delivery systems, the introduction of new technologies, cost-containment efforts by government, employers and insurers, and changes in the provider/patient relationship have contributed to this complexity. Health economists have studied various aspects of these changes and the potential effects of specific policies, but typically within the confines of simple partial equilibrium, one-sector models. Multi-sector, general equilibrium methods used in other areas of economics have not been widely used in health services research. The broader goal of this research is to develop an applied (or computable) general equilibrium model of the U.S. health care system, including key linkages within the health care sector as well as important relationships between health care providers and other sectors of the economy. The model will include explicit submodels of the behavior of FFS providers, managed care providers (HMOs), households, and private insurers. The behavior of employers (as co-purchasers of health insurance) and government (as a taxing authority) will be represented by key parameters. The six submodels will be tied together by a set of conditions that define equilibrium of the system. Altering key parameters of this system allows one to examine the net effects of major reform proposals. The specific goals of the study are to use an empirically calibrated version of this model to consider the possible effects of: (i) proposed reforms in the tax treatment of health insurance premium payments; and (ii) proposals designed to encourage enrollment in managed care systems. This analysis will provide valuable information to health care planners and policymakers about the direct, indirect and net effects of health care reforms.
